China's paper industry has built up a massive recycling capacity that is shielding forests worldwide from destruction by supporting a strong international market for wastepaper as an alternative to pulpwood, according to a new report released on July 13 by Forest Trends, an international forestry organization.

The Forest Trends report, "Environmental Aspects of China's Papermaking Fiber Supply," notes that today about 60 percent of the fiber used to manufacture paper and paper board products in China is derived from wastepaper -- a substantial portion of which comes from the United States, Europe and Japan. In the last 10 years China's wastepaper imports increased by more than 500 percent -- from 3.1 million metric tons in 1996 to 19.6 million metric tons in 2006 -- with most of that growth occurring between 2002 and 2006.

However, the report warns that wastepaper alone is not sufficient to keep up with China's production demands, as high quality pulp and pulpwood also are being used to supply international buyers with high quality paper. The report finds that the same explosive growth that's created such a strong market for wastepaper also is boosting China's demand for pulp and pulpwood from developing countries already struggling to contain illegal and destructive logging. For example, China today buys some of its pulp and pulpwood from Indonesia and Eastern Russia where illegal, environmentally rapacious logging is widespread. And any increase in demand could exacerbate problems in those regions.

"China is by far the world's biggest consumer of wastepaper and that's a good thing because in the last four years alone, China has prevented 65 million metric tons of wastepaper from heading to landfills in the United States, Japan and Europe," said Brian Stafford, the lead author of the report and an expert on the international pulp and paper industry. "Just last year, China's use of wastepaper instead of trees to make paper products probably saved 54 million metric tons of wood from being harvested for pulp."

However, Stafford said that as China's producers scramble to meet growing domestic and international demand for paper products especially for higher quality papers, they continue to use substantial amounts of wood and wood pulp from countries where good forest management cannot be assured.

"The biggest environmental challenge related to China's paper industry is to prevent its growing demand for fiber from driving ever more forest destruction in places like Indonesia and Eastern Russia," he said. "Wastepaper can only provide so much fiber and with huge new pulp mills coming on line in China, there is a legitimate concern that future growth in China's paper industry is going to happen at the expense of already stressed natural forests in the tropics."

The report comes amid growing international controversy over the influence of China's industry on the global market for paper and raw timber. Environmental groups worry that China's paper industry, along with its similarly red-hot wood products industry, is meeting rising domestic and international demand by ramping up imports of logs and pulp from abroad without focusing on whether the materials come from legal and sustainable forests.

At the same time, producers in the United States, claiming that government subsidies give Chinese producers an unfair advantage in the world paper market, recently convinced the U.S. Department of Commerce to place trade sanctions in the form of higher import duties on glossy paper manufactured in China.

However, as environmentalists worry about the effects on forests, and U.S. paper producers nervously monitor the market power of their Chinese counterparts, it's clear that the growth of China's paper industry is playing a major role in ensuring the viability of wastepaper recycling programs in the US, Europe and Japan, the report stated.

In 2006, the United States alone sold 8.6 million metric tons of wastepaper to China -- 2.8 million metric tons more that its entire 1996 global trade in wastepaper. Wastepaper is now one of the top U.S. exports to China by volume. The report observes that today it's not unusual for Chinese container ships to off-load goods at U.S. ports and then return to China loaded up with U.S.-collected wastepaper.

Ironically, the high quality of U.S. wastepaper that makes it so attractive to recycling operations in China is due to the fact that most U.S. paper companies manufacture their products with "virgin fiber" derived from timber.

The report notes that about three-quarters of the fiber China gets from wastepaper is used "to manufacture corrugated cardboard boxes to ship the great quantities of Chinese goods such as consumer electronics, clothing, and furniture to overseas markets." The rest is mostly employed to make newsprint, as well as certain types of coated paper used in magazines and advertising catalogues (though not the coated paper that was the subject of the U.S. trade complaint).

"It's clear that the sheer volume of the wastepaper used in Chinese manufacturing has a very beneficial and stabilizing effect on the global market for wastepaper, which in turn makes wastepaper collection a viable 'green' option for communities in wealthy countries," said Kerstin Canby, director of forest finance and trade at Forest Trends. "But we remain concerned that Chinese paper companies can't survive on wastepaper alone, and when they look for other types of fiber -- chiefly fiber needed for export-quality paper -- some large firms have a tendency to go shopping for wood and pulp in countries where natural forests already are under tremendous pressure."

For example, the report found that of the 7.4 million metric tons of high-grade printer paper China produced in 2005, only 64 percent "can be regarded as having been drawn from sustainably managed wood resources." For example, Indonesia and Eastern Russia are among China's suppliers of pulp and pulpwood and the report concludes that "paper manufacturers that source from these countries are likely to be running a high risk of including illegally logged wood in their product."

The report recommends that Chinese paper companies should adopt systems, such as those that have been established by the non-profit Forest Stewardship Council (FSC) and the Tropical Forest Trust, that would enable them to track pulp and pulpwood all along the supply chain in order to verify it comes from legal and sustainable forests. For example, in Western Russia, two logging companies have worked with four of the world's biggest consumers of paper products -- publishers Axel Spring, Time UK and Random House in addition to packaging manufacturer Tetra Pak -- to create a transparent supply chain of wood fiber derived from legal and sustainable forests.

The report also calls on government or "public" buyers of paper to police their supply chains for illegal wood as a way to encourage other major importers to do the same. The report observes that the European Union and Japan already have gone this route for several wood product categories and that China could start with a pilot procurement program that ensures paper supplies related to the 2008 Beijing Olympics are manufactured with raw materials derived from verifiably legal and sustainable sources.